Risks

Smart Contract Risk

Affluent’s contracts could, in theory, contain vulnerabilities or logic errors that jeopardize funds. To mitigate this, all contracts undergo rigorous, independent audits by leading security firms before deployment.

Oracle Risk

The protocol depends on decentralized oracles for price data. Incorrect feeds—caused by data errors or outages—can lead to mis-priced collateral or liquidations. Affluent integrates highly reliable, decentralized providers and employs redundancy and on-chain sanity checks to minimize this exposure.

Underlying Asset Risk

Both the lending markets and Strategy Vaults are exposed to movements in the assets they hold. A sharp decline or unexpected failure of an underlying token can lead to under-collateralisation or direct losses. Vault Managers conduct rigorous due-diligence when selecting assets, favouring those with deep liquidity and credible fundamentals. In addition, every asset is subject to an exposure cap, ensuring that no single position can jeopardise overall vault health.

Liquidation Risk

If a borrower’s Risk Ratio or Leverage breaches market thresholds, collateral is partially liquidated. Strategy Vaults face the same risk whenever they employ leverage—for example in looping or structured borrow strategies. Vault Managers continuously monitor vault metrics and adjust positions pre-emptively so that leverage and risk ratios remain well below liquidation triggers.

Liquidity Risk

Liquidity represents the ability to access supplied assets. In a lending market, insufficient pool liquidity may temporarily delay withdrawals. Strategy Vaults introduce an additional layer: assets may already be deployed across multiple strategies, making immediate redemption difficult. To mitigate this, each Vault Manager maintains a cash buffer—an idle liquidity reserve—specifically to meet user withdrawals on demand. The protocol’s dynamic interest-rate model further attracts fresh deposits during periods of tight liquidity, restoring normal withdrawal cadence.